Beyond all the talk of watching the television and playing with dogs in Call of Duty, Microsoft’s Internet connectivity and software authorisation strategy for the freshly-unveiled Xbox One has been a major point of discussion on the console, partly because they involve some arguably anti-consumer decisions with respect to Digital Rights Management (DRM), but also because the company has failed to communicate these new and unproven conditions in an easily understandable way.

Read on as we explore and attempt to make sense of the Xbox One DRM situation; what it means with regards to offline gaming, secondhand sales, and general consumer inconvenience, and consider whether there are legitimate justifications for the added security, of it it’s just a play for customer lock-in and anti-piracy...

In the weeks prior to the Xbox One announcement, rumours swirled that the new platform might require a constant, uninterrupted connection to the Internet in order to play any and all games. Fortunately the reality is not quite as extreme, but it’s still a step further than any mass market consumer entertainment device has gone before.

The Xbox One will require Internet connectivity to install games customers purchase on Blu-ray disc; a newly installed game will be linked to a customer's Xbox LIVE account, allowing them to redownload it later with or without the disc, as if it had been bought online to begin with. This means no more simply just handing a game disc to a friend when you’re done with it: using your disc to install a game will only save them the download time, as they’ll still have to complete an online purchase at full price in order to play with their own Xbox LIVE account.

Some single-player (or local multiplayer) games will still be playable if an Internet connection is temporarily unavailable, but an authorisation check by the system reportedly restricts this grace period to a maximum of 24 hours.

It would also thwart the secondhand games market as we know it. A workaround that “they’re not ready to talk about yet” is being promised, but they’ve also said that they're “working with our partners to support the secondhand market”, and given that games retail giant GameStop (owner of EB Games in Australia) -- for whom a huge amount of revenue depends on the used disc market -- didn’t flinch in their latest earnings call, suggests that they’ll be involved in the process, with both the store, and Microsoft, likely taking their cut out of the transaction. To be clear, this particular point is conjecture and speculation at present, but if true, would mean no more throwing your games up on eBay, or getting cash-in hand from a friend without the platform overlord and shopfront getting a taste.

Of course none of this was mentioned in the press conference event, or even in the fine print of the official press release, but has only been extracted from Microsoft representatives by the press in the hours following, suggesting that they’re well aware that it’s going to be a hard sell.

We’ve seen most of these concepts individually implemented in other devices, but bringing them all together like this is new territory for a games console. That Microsoft has been barely able to explain how it works, let alone present any coherent arguments for why it’s necessary, has fueled suspicions that it’s about profits at the expense of consumer rights.

Obviously there are several big advantages to the platform holder in locking down a system in this manner: piracy becomes an order of magnitude more difficult, you can prevent or control early access, you remove a barrier to future purchases when every single customer has to create an account on your digital storefront and see your latest ads each time they use the device, you can ensure customers games are patched to the latest version before they first play, you get accurate and instant sales data from every game purchased, you can log and track behavioural data from every game played, and as a customer’s purchase library grows, so does their commitment to your marketplace over competitors.

The decision makers appear to be viewing it as a natural progression of the concept of software as a service, rather than a product -- the inevitable Internet of things -- but what perceivable benefits, that weren’t possible under the previous model, does this new arrangement present consumers?

The ability to redownload any purchased game without needing the disc, the convenience of being able to store all of your games on the system and play them all without disc-swapping, and being able to sign into your Xbox LIVE account on another Xbox One and access your complete games library there, are really the only direct positives for consumers. That’s seriously it.

To really play devil’s advocate, we could entertain the notion that all of the information gathered from the console’s ability to log everything you do (and watch you while you sleep on the HD Kinect camera), will enable Microsoft to finely tune a superior experience for all users. We could argue that stamping out piracy will result in enough additional games purchases to justify bigger development budgets for higher quality titles, and we could humour the suggestion that the threat of a banned Xbox LIVE account revoking access to all of a user’s purchased games might improve the sportsmanship in the average Call of Duty match. Perhaps in a perfect world.

Microsoft spokespeople have been trumpeting the possibilities that always-connectedness presents for online social integration -- being able to experience some form of togetherness in every game, whether it has direct multiplayer or not -- and the concept of cloud processing, whereby your Xbox One could outsource some complex computing tasks to Microsoft’s powerful Azure Internet servers, which would theoretically boost the raw performance capabilities of the local device.

The thing is, those last examples would all still be possible on a per-game basis, they don’t necessitate the entire system being shackled to the Internet, and implying that they do is misleading at best. Ultimately, it’s merely the elimination of a choice for consumers, and an escalation of control for the platform holder, which is the very definition of DRM.

Some have likened the Xbox One DRM strategy to Steam on the PC -- you have to activate your disc-bought games to your online account -- and posited that plenty of people are perfectly happy with the process there, but the key difference is that the Steam ecosystem resides, and was built from scratch, on an open platform where its customers were only an alt-tab away to other alternatives if they sour on the experience.

Valve’s enduring benevolence has driven Steam’s success, and is almost certainly why indie developers can self-publish their games there, single-player games can be played offline, users can still modify and tinker with games to their heart’s content (with multiplayer games still protected by file integrity checks), and a viable marketplace for user-generated content is thriving.

The Xbox One will launch into a competitive market too, obviously -- and in contrast, Sony maintains that PlayStation 4 discs will still be tradeable -- but is the average consumer likely to notice the Internet connectivity requirement as a point of difference, or evaluate it as a negative when making their purchase choice? The sad truth is that most people are blissfully ignorant of DRM implementations, until either the protection method falters and hampers normal operation (hello SimCity and Diablo 3), or they discover during a play attempt that perfectly reasonable fringe use cases like loaning a game to a friend, or playing when your broadband is severed are no longer possible.

For many customers, the experience may well be fine, with the loss of consumer rights never impeding their entertainment experience, but for others the Xbox One will undoubtedly be the Trojan horse, and the first glimpse they get of the invaders inside might not be until an account ban from a heated Xbox forum post locks out hundreds of dollars of games, or a denial-of-service attack on Microsoft servers leaves them unable to install that new game they just brought home.

By committing to this DRM scheme, the decision makers behind Xbox One have made a wager that the console’s platform-exclusive offerings and core user experience will be enticing enough for shoppers to disregard the erosion of consumer rights. With a reported 15 exclusive games scheduled for its first year, a $400 million NFL deal, and presumably much more palm-greasing to get timed-exclusives on downloadable content and other entertainment deals, Microsoft is taking a serious punt on either consumer ignorance, apathy, or acceptance of tighter DRM controls.

The #dealwithit controversy -- when amidst pre-announcement rumours that the device would require an uninterrupted broadband connection to function, careless Twitter comments by a Microsoft Games Studios Creative Director suggested customers should just stop worrying and learn to love the always Internet connected console -- may have come from someone that was “not a spokesperson for Microsoft” (and is now no longer with the company, presumably as a result), but with the unveiling now behind us, it seems to have been a rather accurate take on the Xbox One software strategy. If the next Forzas, Halos, Gears of Wars, and whatever else Microsoft can produce or procure for exclusivity, are compelling enough, then deal with it we begrudgingly shall.

"We could argue that stamping out piracy will result in enough additional games purchases to justify bigger development budgets for higher quality titles"

Where are the third party reports advocating that piracy has a direct relationship to lost sales? I was under the impression that there has been no conclusive evidence to support that theory, in fact the opposite may be true (please enlighten me if im mistaken). Most download because they can, can't afford it, already own it in a different medium (console owned downloading pc cause they feel entitled) or simply want to try the game before purchase as they have been burnt in the past from marketing hype. If they couldn't obtain it for nothing they would simply go with out; it's not a lost sale and most definitely no where near a 1:1 relationship of pirated copies being lost sales which some publishers throw around.

In contrast a second hand sales from something like gamestop or EB, from a publisher point of view, is 100% lost sale. The consumer spends $5 to $10 less yet the publisher will get $0. As far as a publisher would be concerned used game sales is worse than piracy. This model is purely to stamp it out OR to get a healthy cut possibly leading to a heavily controlled market. It'd be like Holden/Ford demanding people send a cut for every used car sale - Im sure they'd love to do it too.

I really hope consumers are smart enough to see the writing on the wall. Seriously if your wanting a gaming console PS4 looks to be the much more consumer friendly one - i really hope sales reflect that.

Honestly it's more likely car companies would find a way to prevent 2nd hand sales, than gaming companies backing down from this.

They already do s*** like this:

Automobiles [edit]
Automobiles are often made with certain parts, such as car stereos, which might be interchangeable. Sometimes the manufacturers will attempt to create lock-in by various means; in the case of a stereo, they might make the stereo unit an unusual size and shape instead of a standard one[dubious – discuss], or create a unique way for the dashboard part of the stereo to control a CD Changer in the trunk. Other ways include combining other required components into parts that are often replaced. Many GM vehicles send airbag warning signals to the radio. When the radio is replaced with a non-GM radio, the warning system will no longer work and the airbag system may stop functioning altogether. Either a GM radio must be used or a reverse engineered adapter must be wired in.
Various standards organizations, such as the US Department of Transportation, regulate the design of certain automobile components to prevent vendor lock-in.

Yer but that is to do with modifying a car. You already can not to do that with games, well you're not supposed to be anyway. S*** look at mods, very few games actively support modding these days - well none that i know of on consoles, instead you have "locked in" DLC which essentially is what you are making a comparison to.

I was trying to make a comparison that if you sold/gave away your car you'd have to send ford/holden a % cut. That's effectively the system MS are trying to introduce.

Denthor, regarding PlayStation 4 Sony hasn't actually come out with a clear message on how their system will treat used games. The only thing we know so far in regards to DRM is that it doesn't need to be constantly online (which technically Xbox One doesn't either, just needs a check every 24 hours) and will play used games (which Xbox One can do as well).

I believe we will hear more information on both console makers DRM situations through E3 and beyond as we get closer to launch. Hopefully they will be able to give a clear indicator of what the go is so as not to confuse too many people.

I'm glad I never liked consoles, this whole new system is sickening. Unfortunately there's gonna be many people that are unaware to all of this. The idea is like steam except this is a much harsher method, no backwards compatibility with 360 games, so many restrictions to play a game you rightly paid money for, do people really want to buy this junk of a console? It's not worth it whatever it will cost.

there is no system in place like the ms one. I'm not sure how much clearer the Sony Worldwide Studios boss could make it. that was back in feb

agreed that more info will co.e to light and if ms were smart they would gauge public reaction and dial it back if its too negative. regardless the direction s**** going with media be it gaming or movies I kinda want nothing to do with it. long live the indies?

I could see a potential situation where the big publishers favour the Xbox One due to their used game policy, either prioritizing content or exclusive releases on the Xbox. In the long run they may see that as more of an investment, if you want those games you're going to have to play them on the xbox and you're going to have to buy it in a way that gives the publishers and developers there cuts.

On the flip side with PS4 support of indie devs they will likely gain a lot of content that won't ever appear on xbox one. Making a very weird situation where most of the big AAA games are on xbox and all the cool indie games are on PS4.

Excellent article with very real considerations. Microsoft's DRM move seems arrogant, but I hope they reveal a much more lenient system or price compensation to go with it. Don't forget that when comparing Microsoft to steam that steam often have cheaper than retail game prices. If Microsoft follow suit and sell their games cheaper (because they draw a direct correlation between piracy, lost sales and price increases), then I think customers will be happy with that. It's paying full RRP for a game and getting full DRM restrictions with it that will be the problem. I think it's all about give and take.